1. True or false (explain): The terms of trade of a country is the price of expo
ID: 1163212 • Letter: 1
Question
1. True or false (explain): The terms of trade of a country is the price of export over the price of import An improvement of the terms of trade of one country is necessarily associated with a deterioration of the terms of trade of its trading partner a. b. 2. If the international relative price of good X in terms of good Y is higher than country A's autarky relative price of good X in terms of good Y, (chose one) a. Country A has an absolute advantage in good X b. Country A has an absolute advantage in good Y c. Country A has a comparative advantage in good X. d. Country A has a comparative advantage in good Y 3. Mention if the following statements are True or False. Explain clearly WHY it is true or false, using ideas and concepts explained in class The Neoclassical Trade Theory states that trade arises due to different amounts of labor and capital in a country The H-O theory states that trade arises due to different CICs (community indifference curves) in a country a. b. 4. If relatively capital-abundant country A opens trade with relatively labor-abundant country B and the trade takes place in accordance with the Heckscher-Ohlin theorem, what would be the consequence for factor prices (w/r) in the two countries? (chose one) a. b. c. d. (w/r) rises in A and falls in B (w/r) rises in A and also rises in B (w/r) falls in A and rises in B (w/r) falls in A and also falls in B 5. An implication of the Heckscher-Ohlin theorem is that: (chose one) if two countries have identical tastes, then no trade will occur between them. the relative price of a country's scarce factor of production will rise when the country is opened to trade income distribution in a country does not change when a country is opened to trade two countries with identical tastes can still have a basis for trade if factor endowments of the countries differ and if factor intensities of the commodities differ a. b. c. d. 6. If a commodity is classified as "labor-intensive" at one set of relative factor prices but "capital- intensive" at another set of relative factor prices, this situation is known as a. demand reversal b. factor price reversalExplanation / Answer
1)
a)
Terms of trade is ratio of export price to import price. It measures export capacity to import. Hence, This is True statement.
b)
term of trade gets improved when same export level is able to import more goods. Thus, when one country’s term of trade improves, automatically other faces deterioration.
This is True statement.
2)
Right answer is (C)
Since relative price of X is greater than Y, thus it would be profitable to specialize in production of good X. it is comparative cost advantage.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.